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Despite Parity Law, Mental Health Coverage May Still Fall Short

By KATE STEADMAN, Kaiser Health News

July 21, 2010

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For decades, mental health advocates have fought to get health insurance "equal rights" for patients with mental illnesses or brain disorders. The first taste of success came when President Bill Clinton signed the Mental Health Parity Act of 1996, which prevented employer health plans from setting different annual or lifetime limits for mental health services than they did for other coverage. And then, the Mental Health Parity and Addiction Equity Act of 2008 expanded the rules to include substance abuse treatment and barred employers who include mental health services in their insurance plans from covering them at a lower level than other medical conditions. As a result, an estimated 140 million Americans no longer face higher deductibles, steeper co-payments or other restrictions when they seek mental health and substance abuse treatment services.

In general, these rules apply to health insurance plans that include mental health coverage, which is not required under the law, and are offered by employers with more than 50 employees. While the law took effect in October 2009, health plans could wait until the start of the next plan year to comply.

To get a progress report on the law's implementation, KHN's Kate Steadman checked in with Andrew Sperling, the director of federal legislative advocacy for the National Alliance on Mental Illness. He has some concerns, including the continued exemption of small businesses and individual health insurance plans from parity requirements, but is optimistic that the new health reform law will advance the effort to "eradicate" differences in how mental health treatment is covered by insurers. Here are edited excerpts of the interview:

Q: What are the main changes made by the 2008 law regarding health insurance coverage of mental health and substance abuse services?

A: [The measure] expands the 1996 law in two very specific and big areas. The old law required equitable coverage, but only in respect to annual and lifetime dollar limits. The GAO did a study in 2000 that found health plans reacted to the requirements by "squeezing the balloon" in other areas, so to keep costs from escalating they pushed other limits like higher deductibles and higher cost-sharing. [The newer law] also requires more robust limits. It requires parity in terms of caps on inpatient [hospital] days and also out-of-pocket limits and limits on cost-sharing and deductibles for mental health benefits. The big reason to push for a parity bill was because of the 42 states that had parity laws, none of them could [regulate] self-insured plans. The laws were inadequate and were missing as much as 55 percent of people in some states.

Q: Do you notice any significant change in the number of employers covering these treatments because of the law? Are employers moving to carve out specific types of treatment to control costs?

A: I haven't seen any independent studies demonstrating that, but we've had some complaints. What we're worried about is that managed behavioral health plans and other health plans continue [limit mental health benefits].

Plus, there are a not insignificant number of non-federal governmental plans that [can] waive the new parity rules. They're self-insured state and local plans.

The state employee plans in Alabama – waiving parity. The Montgomery County, Md., school system is now exempt. It's like a Chinese food menu. They can pick and choose what to waive.

Q: Does the parity law affect small businesses and people with individual health insurance coverage?

A: There were two major exemptions [in the 2008 law]: Individuals and the small group market. Other [advocacy] groups always made a very persuasive case that to compel an individual policy, or, more importantly, a small group, to make mental health coverage equally available would make insurance unaffordable for who we were trying to help. The classic case of this would be a dry cleaner with 16 employees, one is bipolar. Treatment for the one person would make coverage for everyone in the group unaffordable. We could never muster a compelling argument to overcome that. So every bill had a small business exemption, and there is the same issue for the individual market.

Q: How does the new health law affect mental health parity?

A: Health reform will change those exemptions in a major way. It will absorb in many ways the small group and individual market. There are large concentrations of uninsured people in these groups and coverage is more expensive in these markets for everything, especially if someone has a mental health diagnosis.

Sen. [Debbie] Stabenow, D-Mich., sponsored a provision that requires all plans offered in the new insurance exchanges to have a mental health benefit, and that benefit must also comply with the parity law. This is what the exchanges are designed to do -- they are meant to eradicate the disparities in the markets.

In terms of Medicaid, the new eligibility categories are huge for NAMI -- particularly in southern states. For example, in Florida, the only way to get on Medicaid if you are an adult with mental illness is to be declared disabled and eligible to receive Social Security Income. We're convinced that a large chunk of the new Medicaid eligible population in states like Florida is going to have a mental illness or other type of impairment or disability.

Q: Since the law does not apply to individual policies, what advice do you offer those patients and families seeking care right now?

A: It's not so bright for the next four years. Everyone I've gotten calls from in the individual market who wants to go to a high-risk pool … well, you have to be uninsured for six months [to qualify]. In all fairness, I think the pools great and they have enormous potential. There's a reason for [the waiting period]. … And the high risk pool requirements won't change between now and 2014. For a lot of people, they will have to wait.